Title: Crypto Investors on the Lookout for the Fed’s Interest Rate Hike
Jul 27, 2022 06:00AM ET
By: AnalysisWatch
The bearish cryptocurrency trend continues to draw on due to pessimistic expectations about the U.S. Federal Reserve’s attempts to control inflation.
Experts generally agree that interest rates will remain high for as long as prices rise, which is generally considered bad news for the crypto market.
After recovering last week, Bitcoin’s (BTC) price has fallen again. The world’s largest cryptocurrency by market capitalization was trading at $20,982 on Tuesday, July 26th at 13:51 (UTC), losing 4.44% in the last 24 hours, according to CoinMarketCap.
Optimistic analysts had hoped that cryptocurrency had made it through the bear market, and would manage to settle in the $25,000 range. But expectations of a further interest rate hike by the US Federal Reserve this week have seen the value of BTC plummet once gain.
In fact, the recovery in BTC’s price, which saw it reach $24,000 last week, was largely due to the fact that analysts had assumed that the Federal Open Market Committee (FOMC) would likely increase interest rates by around 75 basis points (0.75%), and not the 100 later speculated.
This perception is based on the previous 0.75 point increase made by the Fed in June, marking the highest hike in four decades, and the behavior of bitcoin futures contracts. However, the downward trend continued, with some experts attributing the fall to the Fed’s continued aggressive application of monetary policy, which may remain for some time to come.
Ultimately, this means that the prices of shares, and more so those of crypto assets, will continue to fall even further. Digital assets have been the first victims of the recession fears caused by rising interest rates.
Economists surveyed by Bloomberg this month estimate the probability of a recession in the next 12 months to be 47.5%. In June, the same survey determined that only 30% projected a forthcoming recession, indicating rising tension.
Another survey conducted by Reuters among a group of economists also produced more or less similar results. According to the study’s conclusion, the chances of a recession in the U.S. next year stands at 40%.
Regarding the increase in interest rates, there is an almost unanimous opinion that they the Fed intends to increase them by 0.75, rather than 100 basis points.